Tuesday, 17 April 2012

Population and economic growth

Don Boudreaux has been writing to the New York Times about population growth and the economy:

Reporting on Nigeria’s growing population, Elisabeth Rosenthal uncritically advances the popular narrative that large populations hamper economic development (“Nigeria Tested by Rapid Rise in Population,” April 15). She supports her point with demographer Peter Ogunjuyigbe’s declaration that “If you don’t take care of population, schools can’t cope, hospitals can’t cope, there’s not enough housing – there’s nothing you can do to have economic development.”

Not so.

Fifty countries today have population densities higher than that of Nigeria. Forty-two (or 84 percent) of these have per-capita incomes higher than that of Nigeria – and in many cases multiple times higher. South Korea, for example, has three times as many people per square mile as does Nigeria, yet South Korea’s per-capita income is more than ten times higher than Nigeria’s.

Nor does rapid growth of population necessarily prevent rapid growth of the economy. Over the past 150 years, California has had an average annual population growth rate of about 3.1 percent. (In some periods it’s been much higher, such as in the 1920s when California’s population grew at an average annual rate of 5.2 percent.) Only in the past 40 years has California’s annual population growth rate fallen below Nigeria’s current annual population growth rate of about 2.27 percent. Yet, obviously, this hefty population growth can hardly be said to have been a drag on California’s economy.

The point is an important one for a country with such a small population as New Zealand. A larger population isn't something to be feared in terms of our economic growth. Agglomeration effects that come with large cities is just one example of how a larger population can if fact help growth.

1 comment:

Such views often come from the neo-Malthusian view that there will always be more hungry mouths than food to go around, and this will cause social tension. It absolutely doesn't have to be like this, resources just need to be allocated more equitably.